TriCo Bancshares Announces Quarterly Results

April 29, 2014 04:30 PM Eastern Daylight Time

CHICO, Calif.--(BUSINESS WIRE)--TriCo Bancshares (NASDAQ: TCBK) (the "Company"), parent company of Tri
Counties Bank, today announced earnings of $7,365,000, or $0.45 per
diluted share, for the three months ended March 31, 2014. These results
compare to earnings of $8,477,000, or $0.53 per diluted share reported
by the Company for the three months ended March 31, 2013.

Total assets of the Company increased $142,751,000 (5.5%) to
$2,755,184,000 at March 31, 2014 from $2,612,433,000 at March 31, 2013.
Total investments increased $296,854,000 (192%) to $450,955,000 at March
31, 2014 from $154,101,000 at March 31, 2013. Total loans increased
$154,690,000 (10.1%) to $1,687,052,000 at March 31, 2014 from
$1,532,362,000 at March 31, 2013. Total deposits increased $125,570,000
(5.5%) to $2,411,120,000 at March 31, 2014 from $2,285,550,000 at March
31, 2013.

The following is a summary of the components of the Company’s
consolidated net income for the periods indicated:

Three months ended

March 31,

(dollars in thousands)

2014

2013

$ Change

% Change

Net Interest Income

$26,072

$24,569

$1,503

6.1

%

Benefit from reversal of provision for loan losses

1,355

1,108

247

22.3

%

Noninterest income

8,295

10,218

(1,923

)

(18.8

%)

Noninterest expense

(23,317

)

(21,601

)

(1,716

)

7.9

%

Provision for income taxes

(5,040

)

(5,817

)

777

(13.4

%)

Net income

$7,365

$8,477

($1,112

)

(13.1

%)

The following table shows the components of net interest income and net
interest margin on a fully tax-equivalent (FTE) basis for the periods
indicated:

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS

(unaudited, dollars in thousands)

Three Months Ended

Three Months Ended

Three Months Ended

March 31, 2014

December 31, 2013

March 31, 2013

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets

Earning assets

Loans

$

1,671,231

$

23,738

5.68

%

$

1,649,692

$

24,470

5.93

%

$

1,548,565

$

24,072

6.22

%

Investments - taxable

390,230

2,976

3.05

%

326,696

2,457

3.01

%

156,057

1,187

3.04

%

Investments - nontaxable

17,618

218

4.95

%

19,641

256

5.21

%

8,884

162

7.29

%

Cash at Federal Reserve and other banks

473,833

309

0.26

%

515,289

375

0.29

%

721,424

446

0.25

%

Total earning assets

2,552,912

27,241

4.27

%

2,511,318

27,558

4.39

%

2,434,930

25,867

4.25

%

Other assets, net

184,852

181,913

174,864

Total assets

$

2,737,764

$

2,693,231

$

2,609,794

Liabilities and shareholders' equity

Interest-bearing

Demand deposits

$

546,998

121

0.09

%

$

534,270

117

0.09

%

$

520,507

141

0.11

%

Savings deposits

840,221

257

0.12

%

826,378

260

0.13

%

782,173

271

0.14

%

Time deposits

280,968

404

0.58

%

297,052

434

0.58

%

333,556

513

0.62

%

Other borrowings

6,461

1

0.06

%

8,629

1

0.05

%

8,188

1

0.05

%

Trust preferred securities

41,238

304

2.95

%

41,238

311

3.02

%

41,238

311

3.02

%

Total interest-bearing liabilities

1,715,886

1,087

0.25

%

1,707,567

1,123

0.26

%

1,685,662

1,237

0.29

%

Noninterest-bearing deposits

731,731

699,530

651,303

Other liabilities

35,262

37,114

39,150

Shareholders' equity

254,885

249,020

233,679

Total liabilities

and shareholders' equity

$

2,737,764

$

2,693,231

$

2,609,794

Net interest rate spread

4.02

%

4.13

%

3.96

%

Net interest income/net interest margin (FTE)

26,154

4.10

%

26,435

4.21

%

24,630

4.05

%

FTE adjustment

(82

)

(96

)

(61

)

Net interest income (not FTE)

$

26,072

$

26,339

$

24,569

Net interest income (FTE) during the first quarter of 2014 increased
$1,524,000 (6.2%) from the same period in 2013 to $26,154,000. The
increase in net interest income (FTE) was due primarily to a
$242,907,000 (147%) increase in the average balance of investments to
$407,848,000, and a $122,666,000 (7.9%) increase in the average balance
of loans to $1,671,231,000 that were partially offset by a 54 basis
point decrease in the average yield on loans from 6.22% during the three
months ended March 31, 2013 to 5.68% during the three months ended March
31, 2014. During much of 2013 and the three months ended March 31, 2014,
the Company used a portion of its Fed funds sold to buy investments. The
increase in average loan balances was due to organic loan growth and the
purchase of $62,698,000 of loans during 2013. The decrease in average
loan yields was due primarily to declines in market yields on new and
renewed loans compared to yields on repricing, maturing, and paid off
loans. The increases in average investment and loan balances added
$1,780,000 and $1,907,000 to net interest income (FTE) while the
decrease in average loan yields reduced net interest income (FTE) by
$2,241,000 when compared to the year-ago quarter. During much of 2013
and the three months ended March 31, 2014, the Company deployed some of
its excess Federal funds sold into some higher yielding investments
while trying to maintain an appropriate level of interest rate risk.
Loans acquired through purchase or acquisition of other banks are
classified as Purchased Not Credit Impaired (PNCI), Purchased Credit
Impaired – cash basis (PCI – cash basis), or Purchased Credit Impaired –
other (PCI – other). Loans not acquired in an acquisition or otherwise
“purchased” are classified as “originated”. Often, such purchased loans
are purchased at a discount to face value, and part of this discount is
accreted into (added to) interest income over the remaining life of the
loan. Generally, as time goes on, the effect of this discount accretion
decreases as these purchased loans mature or payoff early. Further
details regarding interest income from loans, including fair value
discount accretion, may be found under the heading “Supplemental Loan
Interest Income Data” in the Consolidated Financial Data table at the
end of this press release.

The Company benefited from a $1,355,000 reversal of provision for loan
losses during the three months ended March 31, 2014 versus a benefit of
$1,108,000 during the three months ended March 31, 2013. The reversal of
provision for loan losses during the first quarter of 2014 was primarily
the result of improvements in collateral values and estimated cash flows
related to nonperforming originated loans and purchased credit impaired
loans, reductions in nonperforming originated loans and purchased credit
impaired loans, and decreased loss histories for performing originated
loans.

The following table presents the key components of noninterest income
for the periods indicated:

Three months ended

March 31,

(dollars in thousands)

2014

2013

$ Change

% Change

Service charges on deposit accounts

$2,690

$3,140

($450

)

(14.3

%)

ATM fees and interchange

2,013

1,875

138

7.4

%

Other service fees

520

559

(39

)

(7.0

%)

Mortgage banking service fees

420

416

4

1.0

%

Change in value of mortgage servicing rights

(181

)

(61

)

(120

)

196.7

%

Total service charges and fees

5,462

5,929

(467

)

(7.9

%)

Gain on sale of loans

464

2,294

(1,830

)

(79.8

%)

Commission on NDIP

771

761

10

1.3

%

Increase in cash value of life insurance

397

426

(29

)

(6.8

%)

Change in indemnification asset

(412

)

(101

)

(311

)

307.9

%

Gain on sale of foreclosed assets

1,227

551

676

122.7

%

Other noninterest income

386

358

28

7.8

%

Total other noninterest income

2,833

4,289

(1,456

)

(33.9

%)

Total noninterest income

$8,295

$10,218

($1,923

)

(18.8

%)

Noninterest income decreased $1,923,000 (18.8%) to $8,295,000 in the
three months ended March 31, 2014 when compared to the three months
ended March 31, 2013. The decrease in noninterest income was due
primarily to a $1,830,000 (79.9%) decrease in gain on sale of loans to
$464,000, and a $450,000 (14.3%) decrease in service charges on deposit
accounts that were partially offset by a $676,000 (123%) increase in
gain on sale of foreclosed assets to $1,227,000. The decrease in gain on
sale of loans was primarily due to the increase in residential real
estate mortgage rates that occurred in May 2013 that resulted in a
significant decrease in mortgage refinance activity, and thus a
significant decrease in newly originated mortgages for the Company to
sell. The decrease in service charges on deposit accounts was primarily
due to reduced customer overdrafts and a resulting decrease in
non-sufficient funds fees. The increase in gain on sale of foreclosed
assets was due to a general increase in property values and sales
activity from their lows during the financial crisis that started in
2008.

Salary and benefit expenses increased $342,000 (2.6%) to $13,303,000
during the three months ended March 31, 2014 compared to the three
months ended March 31, 2013. Base salaries increased $518,000 (6.2%) to
$8,866,000 during the three months ended March 31, 2014 versus the year
ago period despite a 1.5% decrease in the average number of full time
equivalent employees from 743 to 732. The average number of full time
equivalent employees decreased primarily due to the reductions in staff
from the closing of five branches since December 31, 2012 that was
partially offset by increases in full time equivalent back office staff
and management. The salary expense attributable to the newly added back
office staff and management outweighed the reduction in salaries from
the branch closings. Annual salary merit increases of approximately 2.5%
also contributed to the increase in base salary expense. Incentive and
commission related salary expenses decreased $163,000 (12.7%) to
$1,123,000 during three months ended March 31, 2014 due primarily to
decreases in production related incentives tied to reduced residential
real estate mortgage loan originations and sales. Benefits expense,
including retirement, medical and workers’ compensation insurance, and
taxes, decreased $13,000 (0.4%) to $3,314,000 during the three months
ended March 31, 2014.

Other noninterest expenses increased $1,374,000 (15.9%) to $10,014,000
during the three months ended March 31, 2014 compared to the three
months ended March 31, 2013. The increase in other noninterest expense
was due primarily a $303,000 (18.3%) increase in occupancy expense to
$1,962,000 that included $238,000 of accelerated depreciation expense of
leasehold improvements related to the closing of two branches in the
quarter ended March 31, 2014, a $255,000 (58%) reduction in reversal of
provision for losses on unfunded commitments to $185,000 from $440,000,
a $228,000 (44.8%) increase in professional fees to $739,000 that
included $296,000 of legal and consulting fees related to the proposed
merger with North Valley Bancorp, a $147,000 (29.6%) increase in ATM
network charges to $643,000, and a $100,000 (9.3%) increase in data
processing and software expense.

The following table presents the key components of the Company’s
noninterest expense for the periods indicated:

Three months ended

March 31,

(dollars in thousands)

2014

2013

$ Change

% Change

Salaries

$8,866

$8,348

$518

6.2

%

Commissions and incentives

1,123

1,286

(163

)

(12.7

%)

Employee benefits

3,314

3,327

(13

)

(0.4

%)

Total salaries and benefits expense

13,303

12,961

342

2.6

%

Occupancy

1,962

1,659

303

18.3

%

Equipment

1,036

1,034

2

0.2

%

Change in reserve for unfunded commitments

(185

)

(440

)

255

(58.0

%)

Data processing and software

1,178

1,078

100

9.3

%

Telecommunications

580

525

55

10.5

%

ATM network charges

643

496

147

29.6

%

Professional fees

739

511

228

44.6

%

Advertising and marketing

342

325

17

5.2

%

Postage

227

231

(4

)

(1.7

%)

Courier service

234

167

67

40.1

%

Intangible amortization

52

52

0

0.0

%

Operational losses

177

117

60

51.3

%

Provision for foreclosed asset losses

36

27

9

33.3

%

Foreclosed asset expense

158

99

59

59.6

%

Assessments

521

606

(85

)

(14.0

%)

Other

2,314

2,153

161

7.5

%

Total other noninterest expense

10,014

8,640

1,374

15.9

%

Total noninterest expense

$23,317

$21,601

$1,716

7.9

%

On January 21, 2014, the Company and North Valley Bancorp announced that
they entered into an Agreement and Plan of Merger and Reorganization
under which North Valley will merge with and into the Company, with the
Company as the surviving corporation. North Valley Bancorp shareholders
will receive a fixed exchange ratio of 0.9433 shares of TriCo Bancshares
common stock for each share of North Valley common stock. The merger is
expected to be completed in the third quarter of 2014, subject to
approval of the merger by shareholders of both companies, receipt of
required regulatory and other approvals and satisfaction of customary
closing conditions.

In addition to the historical information contained herein, this press
release may contain certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. The
reader of this press release should understand that all such
forward-looking statements are subject to various uncertainties and
risks that could affect their outcome. The Company’s actual results
could differ materially from those suggested by such forward-looking
statements. Factors that could cause or contribute to such differences
include, but are not limited to, variances in the actual versus
projected growth in assets, return on assets, interest rate
fluctuations, economic conditions in the Company's primary market area,
demand for loans, regulatory and accounting changes, loan losses,
expenses, rates charged on loans and earned on securities investments,
rates paid on deposits, competition effects, fee and other noninterest
income earned, whether and when shareholders and regulators approve the
Company’s proposed merger with North Valley Bancorp, as well as other
factors detailed in the Company's reports filed with the Securities and
Exchange Commission which are incorporated herein by reference,
including the Form 10-K for the year ended December 31, 2013. These
reports and this entire press release should be read to put such
forward-looking statements in context and to gain a more complete
understanding of the uncertainties and risks involved in the Company's
business. Any forward-looking statement may turn out to be wrong and
cannot be guaranteed. The Company does not intend to update any of the
forward-looking statements after the date of this release. Shareholders
are urged to read the joint proxy statement/prospectus that will be
included in the registration statement on Form S-4, which the Company
will file with the SEC in connection the proposed action because it will
contain important information about TriCo, North Valley, the merger and
related matters, including additional risk and uncertainties

TriCo Bancshares and Tri Counties Bank are headquartered in Chico,
California. Tri Counties Bank has a 39-year history in the banking
industry. It operates 41 traditional branch locations and 20 in-store
branch locations in 23 California counties. Tri Counties Bank offers
financial services and provides a diversified line of products and
services to consumers and businesses, which include demand, savings and
time deposits, consumer finance, online banking, mortgage lending, and
commercial banking throughout its market area. It operates a network of
67 ATMs and an automated Customer Service Department, available 24 hours
a day, seven days a week. Brokerage services are provided by the Bank’s
investment services affiliate, Raymond James Financial Services, Inc.
For further information please visit the Tri Counties Bank web site at http://www.tricountiesbank.com.

ADDITIONAL INFORMATION ABOUT THE PROPOSED MERGER TRANSACTION AND
WHERE TO FIND IT

Investors and shareholder are urged to carefully review and consider
each of TriCo’s and North Valley Bancorp’s public filings with the SEC,
including but not limited to their Annual Reports on Form 10-K, their
proxy statements, their Current Reports on Form 8-K and their Quarterly
Reports on Form 10-Q. The documents filed by TriCo with the SEC may be
obtained free of charge at TriCo’s website at www.tricountiesbank.com
or at the SEC’s website at www.sec.gov.
These documents may also be obtained free of charge from TriCo by
requesting them in writing to TriCo, 63 Constitution Drive, Chico,
California 95973; Attention: Investor Relations, or by telephone at
(530) 898-0300. The documents filed by North Valley with the SEC may be
obtained free of charge at North Valley’s website at www.novb.com
or at the SEC’s website at www.sec.gov.
These documents may also be obtained free of charge from North Valley by
requesting them in writing to North Valley Bancorp, 300 Park Marina
Circle, Redding, CA 96001, Attention: Corporate Secretary, or by
telephone at Phone: (530) 226-2900.

TriCo intends to file a registration statement with the SEC which will
include a joint proxy statement of TriCo and North Valley and a
prospectus of TriCo, and each party will file other documents regarding
the proposed transaction with the SEC. Before making any voting or
investment decision, investors and security holders of North Valley and
TriCo are urged to carefully read the entire registration statement and
joint proxy statement/prospectus, when they become available, as well as
any amendments or supplements to these documents, because they will
contain important information about the proposed transaction. A
definitive joint proxy statement/prospectus will be sent to the
shareholders of each company seeking required stockholder approvals.
Investors and security holders will be able to obtain the registration
statement and the joint proxy statement/prospectus free of charge from
the SEC’s website or from TriCo or North Valley by writing to the
addresses provided for each company set forth above.

TriCo, North Valley, their directors, executive officers and certain
other persons may be deemed to be participants in the solicitation of
proxies from TriCo and North Valley shareholders in favor of the
approval of the transaction. Information regarding TriCo’s officers and
directors will be included in TriCo’s Form 10-K Annual Report to be
filed with the SEC, and information regarding North Valley's officers
and directors will be included in North Valley's Form 10-K Annual Report
to be filed with the SEC. Descriptions of the interests of the directors
and executive officers of TriCo and North Valley in the proposed merger
will be set forth in the proxy statement/prospectus and other relevant
documents filed with the SEC (when they become available).